In 2015, almost every country across the globe committed to the Paris Agreement. The objective was straightforward: to limit rise in global temperatures to well below 2°C above pre-industrial levels (1850-1900), and an ambition to keep it closer to 1.5°C. However, global temperatures have already risen by around 1.36°C with temperatures already exceeding 1.5°C for certain months in 2024. Using fossil fuels such as coal, oil, and gas releases carbon dioxide, which traps heat in the atmosphere and causes the planet to warm, leading to extreme weather conditions, rising sea levels, and changes to natural ecosystems.
What really happens when the global temperature rises?
Increase in Heat waves
Heat waves directly impact businesses. For example, In July 2024, Hungary experienced record-breaking heat leading to extreme temperatures that posed a serious threat to the country’s renowned white wines, disrupting traditional growing cycles. Varga Winery, one of Hungary’s largest producers, has responded by reducing direct sunlight exposure on vines and adjusting vineyard locations, to adapt to the changing climate.
Hurricanes
As global temperatures rise, hurricanes become more frequent and intense, with warmer ocean waters fuelling their rapid intensification. In 2024, Delta Airlines lost millions of dollars due to disruptions caused by Hurricanes (which caused 600 flight cancellations in two days).
Floods
Rising temperatures increase evaporation, leading to intense rainfall and rising sea levels, which amplify storm surges causing property damage. For businesses, this means costly repairs, operational downtime, and higher insurance premiums amongst others. In 2021, Volkswagen’s production was delayed after flooding in Slovenia disrupted its supply chain. Similarly, Samsung Electronics faced production halts in 2020 due to flooding in South Korea. These disruptions highlight the urgent need for companies to build climate-resilient strategies to protect operations and supply chains.
Droughts
Rising global temperatures intensify severity of droughts, leading to extreme water shortages, crop failures, and increased risks of wildfires. In 2023, Nestlé reported water stress in their key production regions, impacting agricultural yields of key ingredients, including coffee and cocoa, disrupting supply chains, and raising costs. Similarly, Coca-Cola was impacted due to water scarcity in 2017 in India, that affected production of key ingredients such as sugarcane. Extreme weather events create uncertainty about the cost of doing business. The 2°C threshold is critical because, beyond this point, natural ecosystems like forests and oceans, which act as carbon sinks, face irreversible damage and how they will adapt to these changes may be difficult to model. As these ecosystems decline, businesses will face rising costs of raw material, disruptions in supply chain, changes in consumer preferences and many more. While the impacts at 2°C are already significant, a 2.5°C or 3°C rise would lead to even more widespread and catastrophic destruction, making adaptation difficult and expensive. Staying below 2°C is crucial to avoid the most damaging and expensive outcomes for both ecosystems and businesses.
